SJ Mercury strikes again (and it's great news). MCI buying ASND/SRA product
[Is this Lashinsky guy well connected or what?]
sjmercury.com
Posted at 3:42 p.m. PDT Sunday, August 2, 1998
BY ADAM LASHINSKY
Mercury News Staff Writer
ASCEND'S DESCENT: As the entire investing world knows by
now, shares in Ascend Communications Inc. (Nasdaq, ASND)
plummeted Friday on word the networking equipment company is
close to buying Stratus Computer Inc. (NYSE, SRA).
Ascend's shares fell $7.03, or 14 percent, to $44.47, slicing about
$1.4 billion from its market value. More than 25 million Ascend
shares changed hands, making it the most active stock in the land.
In the face of the carnage, executives for Alameda-based Ascend and
Marlborough, Mass.-based Stratus remained mum. Shares in Stratus
rose 88 cents, or 3 percent, to $28.88.
Although this deal still could fall through, sources with connections at
different levels of Ascend said Friday the company isn't deterred by
the drop and is set to announce the deal as early as today.
Investors seem to hate the deal because Stratus recently has
stumbled, Ascend has gotten distracted before by a big acquisition
and Ascend could be jeopardizing its chances of being bought later in
the year by Lucent Technologies Inc. (NYSE, LU).
Ascend plans to answer at least some of its investors' concerns by
saying it will sell or spin off the parts of Stratus not related to
telecommunications. And the company will divulge that it's ready to
start shipping products to major customer MCI Communications
Corp. (Nasdaq, MCIC) based on technology it has developed with
Stratus.
As for Ascend's acquisition history, the irony is that although its stock
tumbled following its purchase last year of Cascade Communications
Corp. for $3.6 billion, it is Cascade's products that are leading
Ascend's turnaround.
What's more, the focus on Lucent is a bit silly. Lucent is prohibited
even from discussing a transaction that would involve pooling of
interests, a favorable accounting treatment, until Oct. 1. The way
Lucent can gingerly skirt that issue is by employing the
everybody-is-talking-to-everybody strategy. Ascend surely is in that
group.
And if Lucent wants Ascend, it won't let the acquisition of a company
still about one-tenth Ascend's size stand in the way.
Contact Adam Lashinsky at the San Jose Mercury News, 750
Ridder Park Drive, San Jose, Calif. 95190, or
siliconstreet@sjmercury.com or (408) 271-3782.
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